At the height of summer, peaches are ripe and ready for harvest. Some investors are better than others in determining what “ripe and ready” means in the world of picking 52-week lows, knowing not only when a stock's downward spiral will end but also at what price the stock will bottom out. As a REIT investor who often stands alone, Guru Jeremy Grantham built much of his investing reputation by identifying speculative market bubbles as they were happening and avoiding impending crashes. As of March 31, 2013, GMO LLC manages $110 billion in client assets, $48 billion of which is in asset allocation strategies. Today we feature three of Grantham’s high-yield REITs on a 52-week low, and ask: Are they ripe for picking?
Industry Sector: REITs
This week the REIT industry sector has the second largest number of downward sliding stocks, compared to the banking industry still at number one, with 62 out of 656 stocks at 52-weeks lows. Out of 175 REIT stocks in the U.S., 38 of them are currently on a 52-week low. The low ratio is 0.22.
Highlight: CYS Investments Inc. (NYSE:CYS) – Yield 17.60%
The current CYS share price is $8.55, or 43.1% off the 52-week high of $15.03.
Down 41% over 12 months, CYS has a market cap of $1.47 billion, and trades at a P/E of 4.40 and a P/B of 0.90.
CYS Investments Inc. (NYSE:CYS) is a specialty finance company in Maryland created to achieve consistent risk-adjusted investment income. The company invests on a leveraged basis in residential mortgage pass-through securities for which the principal and interest payments are guaranteed by the Federal National Mortgage Association (Fannie Mae), the Federal Home Loan Mortgage Corporation (Freddie Mac), or the Government National Mortgage Association (Ginnie Mae) and collateralized by single-family residential mortgage loans.
Guru Owners: The only Guru owner is currently Jeremy Grantham with 104,462 shares. Guru George Soros sold out at the end of first quarter 2013.
Highlight: ARMOUR Residential REIT Inc. (NYSE:ARR) – Yield 21.70%
The current ARR share price is $4.56, or 42.9% off the 52-week high of $7.98.
Down 40% over 12 months, ARR has a market cap of $1.7 billion, and trades at a P/E of 5.80 and a P/B of 0.50.
Managed by ARMOUR Residential Management LLC, ARMOUR Residential REIT Inc. also invests in hybrid adjustable rate, adjustable rate and fixed rate residential mortgages backed securities issued or guaranteed by a U.S. government-chartered entity.
Gurus Owners: Jeremy Grantham is also holding onto ARR. His trading history shows a willingness to take a loss. Jim Simons sold out his holding in the first quarter of 2013.
Highlight: Hatteras Financial Corporation (NYSE:HTS) – Yield 14.30%
The current HTS share price is $20.26, or 31.7% off the 52-week high of $29.68.
Down 31% over 12 months, HTS has a market cap of $2 billion, and trades at a P/E of 6.00 and a P/B of 0.70.
Hatteras Financial Corporation (NYSE:HTS) is another externally managed mortgage REIT that invests mainly in single-family residential mortgage pass-through securities guaranteed or issued by a U.S. government agency.
Gurus Owners: Jeremy Grantham is also holding onto HTS. His trading history of the last six quarters is in the red. Jim Simons and Louis Moore Bacon sold out this holding in the first quarter of 2013.
Jeremy Grantham is the chairman of the board of Boston-based GMO LLC, an asset management firm. Grantham is regarded as a highly knowledgeable investor in various stock, bond and commodity markets. The firm’s second quarter July 2013 letter addresses the purgatory of low returns .
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